E&O Insurance for Life Agents

E&O insurance for life agents may not be the first thing on the minds of new agents entering the industry. Rather, it’s learning how to do good work for their clients, while soon earning a comfortable living for themselves.

In fact, selling life insurance has traditionally been one of the best careers for business entrepreneurs. There are no barriers to entry other than passing state licenses. New life agents get to define their own market and select their own products (in most cases). And they have the flexibility to make their own schedule and work in any setting they choose, either office- or home-based.

E&O insurance life agentsMost importantly, life agents can earn as much money as their time and talents allow, which explains why selling life insurance has for years been an attractive second career for teachers, laid-off executives, and recent graduates with degrees in business, finance, or marketing (although such degrees aren’t required).

However, new life agents soon realize that bringing in clients is only one side of the success equation. The other is protecting themselves against lawsuits should they make a mistake or neglect to do something important for their clients. They do this by purchasing errors-and-omissions insurance—E&O insurance, for short—which provides two types of benefits: money to pay an attorney to defend against a client lawsuit and funds to cover legal judgments should agents lose at trial.

“Years ago, many new agents didn’t give much thought to E&O insurance,” says Steven R. McCarty, Co-Chairman and Founder, National Ethics Association. “Today, they realize it’s one of the basic forms of insurance all new life agents need. Frankly, it’s shortsighted to buy insurance to protect against a client fall or theft of office equipment and not insure oneself against a client lawsuit potentially costing tens of thousands of dollars or more.”

E&O Claims Are Costly

The risk of going uninsured is particularly acute for new agents, according to McCarty, a former insurance producer who also heads EOforLess, an NEA program that has provided affordable life agent E&O insurance since 2008. The average cost of a life insurance-related E&O claim is roughly $40,000, according to one E&O insurance underwriter. For pension products, that increases to over $70,000 and for disability-insurance claims, to nearly $150,000. Were new agents to face such claims without adequate E&O insurance, it’s likely they would need to liquidate personal assets and, if that weren’t possible, to declare bankruptcy.

E&O Claims Impact Your Business

But paying for the judgment isn’t the only problem. New agents also have to pay for attorney fees, which can amount to thousands of dollars. Together, legal fees, judgments, and court costs can combine to create a financial catastrophe that can spell the end of a new life agent’s career.

And then there are the indirect costs of losing in court:

  • Harm to one’s professional reputation, fueled by online sharing.
  • Emotional stress of dealing with a contentious legal battle.
  • Anxiety or worry about what will happen to one’s business.
  • Opportunity cost of spending time with one’s attorney and E&O claims adjuster instead of working in the business.

E&O Insurance Provider

Given these challenges, new agents realize they need to find adequate E&O insurance protection as soon as possible after they enter the industry. Fortunately, EOforLess provides a convenient and affordable way for new life agents to get covered fast: This website allows life agents to purchase E&O insurance directly from an insurance company without having to get a quote from a broker. What’s more, the firm’s innovative online platform produces “click and bind” protection in minutes, with no hassles, hidden fees, or deductibles.

Most importantly, EOforLess does not impose income caps on new agents looking to purchase coverage. This compares with at least one E&O firm that prohibits agents from earning $100,000 or more in commissions during the year prior to their enrolling and requires them to hold onto the policy for a minimum of two years.

Next Steps for Life Agents

Bottom line: business professionals looking to enter a new career with maximum flexibility and strong earning potential should look no further than life insurance sales. But they should also take immediate steps to protect their finances against litigious clients by purchasing E&O insurance designed specifically for life agents, but with no income caps.

“Taking these steps before an E&O dispute occurs will be one of the wisest things new life agents can do in their initial months in the business,” says EOforLess’ Steve McCarty. “And if they can earn a lot of money with no worries about E&O insurance income caps or a minimum two-year holding period, all the better.”

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The truth is becoming a rare commodity in business these days. In fact, misrepresentation and fraud in financial services is a symptom of a larger pattern of deceit in every corner of American life. Consider these facts:

  • Forty percent of Americans think it’s OK to lie (Ipsos survey, 2006).
  • People lie about 11 times a week, according to Anita Kelly, Ph.D., a psychology professor at the University of Notre Dame.
  • America’s young people are often dishonest, according to the Josephson Institute. Its Integrity Survey found that 38% of young people ages 18-24, and 51% of those 17 and under, believe they must lie and cheat in order to succeed.
  • Labaton Sucharow (a New York law firm) says that 24% of financial professionals believe that unethical or illegal conduct is par for the course.

Voters aren’t the only people who lose faith when lied to. Your customers—the people you rely on for your livelihood—have zero tolerance for industry falsehoods. When lied to repeatedly, they began to mistrust advisors and companies, disbelieve their recommendations, refuse to buy their products, and tear down their reputations. In short, lying to consumers is not only unscrupulous and morally repugnant, it’s a death trap for your reputation and practice.

So what to do about it? Commit to a new level of care: The Truth Standard. Added to the existing Suitability and Fiduciary standards, it would require 100% adherence to fact-based communications, including . . .

  • no longer allowing misrepresentations or omissions about a competing advisor, carrier, or product.
  • banishing fear mongering about the viability of Social Security or the guarantees of the Federal Deposit Insurance Corporation, among other issues.
  • requiring advisors to come totally clean about their professional expertise and training.

Sound refreshing? You bet! So be sure to read E&O HQ articles for further details. For now, follow these guidelines for injecting more truth into your client dealings—and reducing your E&O insurance risks:

  • Never tear down a competing advisor, product, or carrier unless you can provide facts.
  • Don’t prey on senior fears about Social Security, FDIC insurance, or Medicare/Medicaid. Instead, use facts to promote senior understanding.
  • Be fully transparent about your license, business model, and compensation.

For more information on reducing your errors-and-omissions insurance risks, visit National Ethics Association’s E&O Headquarters at